We are an independent, global risk consultancy specializing in helping organizations manage political, integrity and security risks in complex and hostile environments. We provide strategic consultancy, expert analysis and in-depth investigations, handling sensitive political issues and providing practical on-the-ground protection and support. Visit us at www.controlrisks.com or follow us on Twitter @Control_Risks.

Slowly But Surely, US Incentive For Keeping Gulf Oil Flowing Will Diminish

The Persian Gulf has roiled the world regularly since the Iranian Revolution of 1979 – through an Iran-Iraq war, the Gulf War, bombings in Saudi Arabia and Yemen of US military targets, the Iraq War in 2003 and in 2011 the Arab Spring. In each cases, crises spawned in the Gulf sent shudders through global markets, sending the price of oil sky high and prompted US presidents to order naval task forces based half a world away to put to sea.

Yet by 2030, the incentives will have changed. Yes, the US Navy is still watching, warily. And because oil remains a global commodity where prices everywhere are vulnerable to small disruptions, America remains concerned about any problem that might disrupt the flow of oil and gas through the narrow Strait of Hormuz – the bottleneck that could in an instant take Saudi, Iraqi, Qatari, Kuwaiti and other energy supplies off the market. But it’s not the disaster it was in, say, 1991.

Over the next decade and a half the fleets that really care will no longer fly the Stars and Stripes. More than likely, warships from a host of Asian countries – Japan, China, India and others – will be regular visitors to the Gulf by that time. It will be these nations, not the US or its European allies, who have the greatest stake in preventing a calamity that could damage their economies.

For Americans, this may come as quite a relief. For decades, ever since Britain’s Royal Navy lost command of the seas after World War II, the US Navy has provided something of a free public utility by ensuring that global commerce is free to travel on the long, exposed sea lanes connecting major economies. In effect, American task forces are the Coumadin of the global economic circulatory system, preventing blockages and, occasionally, identifying potential tumors to be excised more urgently.

(Like that blood-thinning drug, of course, overdose and other misuse is possible. By and large, though, most of the world is happy for the US to spend billions annually to guarantee free movement of goods by sea.)

The incentives for the US to bear this particular burden are changing. According to the US Energy Information Administration (EIA), by 2030 the share of US oil consumption fulfilled by Persian Gulf sources will have fallen below 35 percent – and perhaps even further, given the new productivity of old US wells, new discoveries off Brazil and the shale gas and tight oil revolution in the US Midwest.

But South and East Asia is facing a very different future. For China, the figure in 2030 is 75 percent. For South Korea, Japan and Taiwan, the percentage is even higher. India’s suppliers are slightly more diverse, but even there over 60 percent of imports will flow from the Gulf in 2030.

Sliced a bit differently, the data leads IEA to project that Asian economies will be importing 90 percent of Persian Gulf oil by 2030. Indeed, higher prices for oil precipitated by a Gulf crisis – at some point – actually becomes a benefit to a country producing as much oil as the US will in 2030.

“From a strategic perspective, the “Achilles heel” of China is its over-whelming dependence on Persian Gulf energy imports to fuel its rapidly growing economy,” says Samir Tata, a former U.S. intelligence analyst and author on naval issues. “The sea lines of communication over which these vital oil and gas imports are transported by tanker … and the choke points linking them are controlled by the US Navy.”

The Obama administration’s “pivot” to Asia may be the beginning of an end to this free ride. Given the costs – both financial and political – of maintaining the US Fifth Fleet’s carriers, escorts and submarines in the Gulf, and the continuing pressure in Washington to curb expenditures, it may not be long before Asian nations have to figure out a way to guarantee their own oil supplies.

This means a very different reality on the high seas. Nature is always a threat in the deep ocean, of course, but since World War II commerce has not feared political threats except in specific places relatively close to shore – the Red Sea off Somalia or the Gulf of Guinea on Africa’s West Coast, for instance.

That may change over the next several decades as new players start acting on new incentives.

China’s disputed claims to areas of the South and East China seas have garnered headlines of late, but the management of the vital energy sea lanes through the Indian Ocean and its multiple bottle necks is a probably a more important factor behind the growth of naval budgets in the region in recent years.

After all, China’s disputes with Japan, South Korea, Taiwan, Vietnam and others over territorial waters is about oil and may exist beneath them. National pride, of course, also plays a role.

But the vast stretches of Indian Ocean that all these nation’s oil and gas imports must traverse is, to put it in the lexicon of national security, a “clear and present danger.”

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.